A new punitive move from the US against Moscow could threaten Russia’s oil sales to India – the largest buyer of Russian crude oil by sea. This will also make it more difficult for Indian refineries to ensure additional year supply contracts.
Washington imposed new sanctions over the weekend, targeting Russia’s leading oil carrier, Sovcomflot. Washington accused this corporation of being involved in G7 price violations for Russian oil.
Three sources said Indian refineries are concerned that new sanctions will create challenges in transporting Russian oil, pushing shipping costs higher. This may narrow the discounts on oil purchased from Russian traders and companies.
Before 2022, India almost did not buy Russian oil due to high transportation costs. However, the refineries of the third-largest oil-importing country in the world are now major customers, benefiting from high discounts from Russia.
India’s crude oil imports from Russia have surged since 2022.
Russia has become India’s top oil supplier in 2023. Through futures transactions and spot market purchases, this South Asian country imported about 1.66 million barrels per day from Russia, compared to an average of 652,000 barrels per day in 2022.
Indian state-run oil refineries such as Indian Oil Corp, Bharat Petroleum Corp, and Hindustan Petroleum Corp are holding joint talks with Russia’s Rosneft and an annual deal to ensure Russia’s total oil volume reaches 400,000 barrels per day, mainly Urals oil. This agreement could start in this fiscal year, from April 1st.
Sources from Reuters said Rosneft now offers a discount of $3-3.5 per barrel compared to the Dubai price, more expensive than the previous agreement between Indian Oil and Rosneft (ending on March 31st) with a discount of $8-9 per barrel.
This source confirmed that this discount does not please Indian oil refineries, especially when they have to deal with instability due to sanctions.
